Suppose the price of video games falls from $40 to $20 and as a result the quantity demanded of footballs falls from 40,000 to 10,000 per year. The value of the cross-price elasticity of demand is
A. 1.00.
B. 0.83.
C. 0.56.
D. 1.80.
Answer: D
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According to new growth theory, as technology becomes more important to growth, so does
A) increasing taxes. B) human capital. C) military spending. D) increasing trade barriers.
If the money wage rate rises, then the
A) SAS curve shifts rightward. B) SAS curve shifts leftward. C) LAS curve shifts rightward. D) LAS curve shifts leftward.
Some economists believe that the economy benefits from firms having market power. Which of the following is an argument that has been made to support this position?
A) Large firms are better able than small firms to spend funds on research and development required to develop new products. B) Research has shown that the deadweight loss from monopolies is a small percentage of the value of production in the United States. C) Competition is very rare in the U.S. economy and few new products are produced by smaller, competitive firms. D) Large firms can afford to lobby the U.S. government in order to impose restrictions on imports and reduce the outsourcing of jobs to other countries.
When a firm produces 1000 widgets with total cost of $2000 and fixed cost of $1000, what is the average variable cost?
A) $2 B) $1 C) $0.50 D) $0.20